📝Fiscal Differentiation Has Been Alpha Theme In FX: J.P. Morgan

Fiscal differentiation has been an alpha theme in FX this year. Away from the broad dollar story, owning the likes of CHF, NOK, SEK and AUD with solid fiscal credentials has handsomely outperformed the fiscally challenged bloc of GBP and JPY (USD too, but leaving the dollar out in the interest of non-USD RV considerations). But Figure 8 The fiscal factor in G10 FX has underperformed over the past month even as long-end yields have continued to price in greater term premium shows that even as long-end DM yield curves have steepened synchronously to price in greater term premium over the past month, the fiscal factor in G10 FX has underperformed, in part as front-end yield spreads have moved adversely against the basket. - J.P. Morgan FX Strategy